Non-participating onlooker or expert?

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Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (Trial Ruling No 2) [2023] FCA 333

In this case, the Court found that an expert, who did not personally trade over-the-counter derivatives, had nonetheless acquired specialised knowledge through his training, study and experience to render his expert report admissible.


The plaintiff, ASIC, alleged that the defendants contravened various provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth).

EFX, the second defendant supplied financial services in the trade of over-the-counter derivative contracts including CFDs and margin FX contracts.

ASIC alleged that EFX engaged in misleading and deceptive conduct, made misleading and deceptive representations, and engaged in conduct that was unconscionable in connection with its supply of financial services to its retail customers.

Expert Evidence

ASIC’s expert witness, Mr B, was the head of compliance at a company which provides services relating to trading in the same contracts as traded by EFX.

EFX raised these two broad objections regarding Mr B’s opinion evidence in respect of several common questions put to him and EFX’s own expert. EFX contended that:

  • Mr B did not have the requisite specialised knowledge because his experience was in “compliance and market supervision”, not trading. EFX said that Mr B was no more than a “non-participating onlooker” who had no more than a “derivative familiarity” in relation to trading strategies.
  • Mr B’s answers to common questions 3, 5, and 8 were objectionable, in part, because he had provided inadequate reasoning to support his opinions, or alternatively that reasoning provided suggested that his opinions were not based on any specialised knowledge that he possessed.

Wigney J rejected EFX’s objections. By virtue of his study, training, and experience, Mr B has acquired specialised knowledge and became an expert in the relevant branch or field of organised knowledge; namely, the operation and functioning of markets for over-the-counter derivatives in Australia (including CFDs and margin FX contracts) and the conduct of participants in those markets. [15]

The mere fact that Mr B did not personally trade in the relevant types of derivatives did not render him a mere observer, bystander or onlooker. Mr B had directly engaged and communicated with client advisers, customers, other market participants and regulatory agencies in respect of the very type of issues that are the subject of common questions 3, 5, and 8. [18]

Mr B identified the industry standard – what a reasonable corporate authorised representative does or would do in the circumstances – and then illustrated the point by reference to his and his company’s practices and procedures. [32] Such reasoning was both permissible and admissible.

ASIC raised a number of objections to the report of EFX’s expert, Mr D, who was an independent consultant and lawyer from the USA, who had experience as a “discretionary foreign exchange, stock index, and commodity derivatives trader”, “managing a foreign exchange desk for a major futures commission merchant”, as a “foreign exchange sales person” and “foreign exchange market-maker”.

ASIC argued that Mr D did not possess the specialised knowledge necessary to permit him to answer common questions 2 and 7.

Wigney J was not satisfied on the balance of probabilities that Mr D, whose experience and qualifications in respect of trading in certain markets in the United States are admittedly impressive, had any relevant specialised knowledge to enable him to answer some of the common questions which require specialised knowledge in respect of the conduct of corporate authorised representatives in the retail market for CFDs and margin FX contracts in Australia. [38] The Court then found parts of Mr D’s report to be inadmissible pursuant to s 79 of the Evidence Act. [46]

Key takeaways

  • The difference between a non-participating onlooker and an expert will turn on whether the expert possesses the right expertise (being their specialised knowledge based on training, study or experience) to be able to assist the court to determine the matter before it.
  • The court must be satisfied on the balance of probabilities that the expert has the relevant specialised knowledge to enable them to provide an expert opinion in the proceedings.
  • Experts must always demonstrate their reasoning which forms the basis of their opinion, and the expert’s opinion must be based on specialised knowledge acquired through the expert’s training, study or experience.
Read the full decision here.

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